QUESTION 2 60 Marks Smoothie Ltd, a Dairy products manufacturing entity trading in Namibia, recently found itself with free cash flow. It decided to invest in Yoghurt Ltd, another financially sound Dairy products manufacturing entity. The following information is available: The Debits and Credits for the two entities as at 30 September 2020 are as follows: Page 19 of 26 DEBITS Smoothie Ltd N$ 100 000 325 000 Machinery Land and buildings Loan-Smoothie Ltd Investment in Yoghurt Lid at cost price(36 000 shares) Yoghurt Ltd N$ 90 000 250 000 80 000 56 000 10 000 Inventories Dividends declared Bank Income tax expense Trade receivables Total 120 0000 77 000 18 000 20 000 51 929 185 000 896 929 40 824 134 500 661 324 160 000 209 469 CREDITS Ordinary share capital(80 000 Smoothie and 60 000 Yoghurt Itd Retained earnings -1 October 2019 Bank overdraft Revaluation surplus Loan-Yoghurt Ltd Dividends payable Accumulated depreciation Trade payables Profit before tax Total 120 000 128 524 58 000 75 000 50 000 80 000 18 000 44 000 150 000 185 460 896 929 10 000 38 000 86 000 145 800 661324 Additional information about the two entities is also provided below: 1. Smoothie Ltd acquired its interest in Yoghurt on 1 October 2014, when the retained earnings and the revaluation reserve (Land and buildings were revalued) of Yoghurt amounted to N$12 800 and N$50 000, respectively. The values of all other assets were deemed to be equal to their fair values. It is the policy of the group to value its Land and buildings every three years. Yoghurt Ltd has not purchased or sold any items of its Land and buildings since 1 October 2014 2. Since the date of acquisition, Yoghurt Ltd purchased some of its inventory from Smoothie Ltd at a cost plus 33.33%. The closing inventory of Yoghurt Ltd on 30 September 2020 is an amount of N$25 000 (2019: N$18 000) purchased from Smoothie Ltd. Total sales by Smoothie Ltd to Yoghurt Ltd amounted to N$300 000 during the current reporting year. 3. Yoghurt Ltd sold one of its machinery to Smoothie Ltd on 1 March 2018 at a profit of N$ 6 000. The carrying amount of the machine in the financial records of Yoghurt Ltd was N$18 000 on this date. The group's policy is to depreciate machinery at 20%per annum according to the reducing balance method. Page 20 of 26 Required: 2.1 Prepare the Proforma Consolidation Journal entries required to prepare the 30Marks consolidated financial statements of Smoothie Ltd Group for the year ended 30 September 2020. Narrations are required